The pan-European STOXX 600 was little changed as gains in the luxury goods sectors offset weakness in chipmakers and financials. Better-than-expected quarterly sales at LVMH lifted shares of the world's largest luxury goods maker to a record high.

European shares have been treading water in recent sessions, with the benchmark index little changed so far this month on mounting political tensions in the Middle East and North Korea, above-average valuations and caution ahead of earnings season.

Expectations that European stocks might see bigger swings in the short term rose to their highest since end-February, following a similar spike in volatility on Wall Street overnight.

On the day, tech stocks were the worst sectoral performers, with a sub-index tracking top European tech firms down 1 percent. Losses were led by Dialog Semiconductor, which lost nearly a quarter of its market value after a German broker said the company risks losing business from Apple.

More than 4.4 million Dialog shares had changed hands by mid-morning making them the busiest traded stock by far on the STOXX 600.

Broker Bankhaus Lampe cut its rating on the chipmaker to "sell" from "buy", warning that Apple could be developing its own PMIC. Dialog Semiconductor supplies Power Management chips to Apple.

"We hear from the industry that about 80 engineers at Apple are already working on a PMIC with specific plans to employ it in the iPhone by as early as 2019," analysts at Bankhaus Lampe said in a note.

Last week, shares in Imagination Technologies lost two-thirds of their value after Apple, its biggest customer, said that it would stop using Imagination's graphics technology.

"(Dialog Semiconductor) could potentially go the same way as Imagination Technologies has recently. It just shows the risks associated with companies being very reliant on one key contract," Dafydd Davies, partner at Charles Hanover Investments, said.

Industry peer AMS also came under pressure after UBS cut its rating to "neutral" from "buy", sending the stock down 7.1 percent, while STMicroelectronics fell 2.6 percent.

Banking stocks dropped 0.5 percent, with Banco Popular the biggest loser, down 4 percent and hitting fresh record lows. On Monday, the bank said that it was considering another capital hike to clean up its balance sheet and would consider a merger deal.

Elsewhere, high-end consumer stocks were on a firmer footing, pulled higher by optimism following LVMH sales. Burberry rose more than 2 percent, while Swiss firm Richemont was up 1.2 percent.

Gains by bluechip commodity-related BP and Rio Tinto , up 1 percent and 2 percent respectively, also helped limit the damage to the broader benchmark from weakness in tech stocks. (Reporting by Kit Rees; Editing by Louise Heavens)